Re: [GNC] Directors loan - do I need an expense account?

[Dr. David Kirkby]

On Fri, 10 Dec 2021 at 20:28, Michael or Penny Novack <
stepbystepf...@comcast.net> wrote:

> On 12/10/2021 10:18 AM, Gyle McCollam wrote:
> > This is a lot different than your first explanation.  Under these
> circumstances where you sold the company electronic equipment, it is indeed
> just an expense.  On the company's books, it is the same as if the company
> had bought the equipment from any other vendor and would in no way be a
> "director's loan".  Treat it like any other expense on the company's books.
>
> Accounting, not gnucash, but ...
>
> a) This equipment, is it short lived? (expected to wear out in a year or
> so). Is it "consumables" used up in processing?
>

No. It's electronic test equipment, which is depreciated over a period of
5-years.

b) If not, do the rules of your jurisdiction allow you to immediately
> expense it? Or do they require you to treat this equipment as a fixed
> asset depreciating over X years (in other words, becomes an expense as
> it depreciates)
>

It needs to be depreciated.

Dave
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Re: [GNC] Directors loan - do I need an expense account?

[davidcousens49]

Gyle 
With one caveat. If the item is a capital item and its intended use is over a
period which is longer than a single accounting period it would not normally be
regarded as an expense but as a capital purchase. Most jurisdictions will have a
threshhold value where the item can be expensed immediately if below a threshold
value but is regarded as a capital purchase if above , i.e is recorded as an
asset not as an expense.

David Cousens

On Fri, 2021-12-10 at 15:18 +, Gyle McCollam wrote:
> This is a lot different than your first explanation.  Under these
> circumstances where you sold the company electronic equipment, it is indeed
> just an expense.  On the company's books, it is the same as if the company had
> bought the equipment from any other vendor and would in no way be a
> "director's loan".  Treat it like any other expense on the company's books.
> 
> 
> Thank You,
> Gyle McCollam
> 
> Gyle McCollam
> 
> 609.680.2326 Mobile
> 
> gmccol...@live.com<mailto:gmccol...@gyleshomes.com>   email
> 
> 
> From: gnucash-user  on
> behalf of Dr. David Kirkby 
> Sent: Friday, December 10, 2021 8:13 AM
> Cc: gnucash-u...@lists.gnucash.org 
> Subject: Re: [GNC] Directors loan - do I need an expense account?
> 
> On Fri, 10 Dec 2021 at 05:14, Adrien Monteleone <
> adrien.montele...@lusfiber.net> wrote:
> 
> > With the usual caveat that this is not formal advice, I agree with
> > Michael. This looks like what we call "Owner's Equity" in my parts.
> > 
> > If this is just for you, then my personal advice is keep it simple.
> > 
> > Keep it in Equity.
> > 
> > You can put the original 'loan' into "Owner's Equity", and any money
> > taken out (or paid back) *from/by* the company can be in "Owner's Draw".
> > (which should be a child of Owner's Equity so the parent results in a
> > net amount at a glance.)
> > 
> > If the Owner returns some of the Draw, that would simply be a reversing
> > type transaction in the Draw account, or an increase in their main
> > Equity account. (though I suppose you could track it in a separate child
> > account still if you wanted, but unnecessary as a report can handle that
> > detail.)
> > 
> > An Accounting textbook would most probably advise that none of this
> > involves expenses or revenue. (unless you start introducing 'interest
> > paid' in either direction.)
> > 
> > Equity is already understood to be a 'liability' of a special type — to
> > the owner(s). It usually is *not* recorded as normal liabilities,
> > because those are usually short term (less than one year) or long term,
> > but Equity is essentially on indefinite terms.
> > 
> > Regards,
> > Adrien
> > 
> 
> The more I think about this, and look at our government's website about
> director loans
> 
> https://www.gov.uk/directors-loans
> 
> I believe I *might *be right in saying the following.
> 
> 1) My accountant is using the term* "directors loan"* rather loosely to me,
> but the way he is recording the transactions to HMRC is accurate.
> 2) Me confusing you guys, but saying it's a* directors loan*, whereas in
> fact, it does *not *meet the definition of a director loan from
> https://www.gov.uk/directors-loans
> 
> The original source of this "debt/liability/expense" or whatever you want
> to call it, was *not *me paying money into the company. Instead I sold the
> company some expensive electronic test equipment, and other items at a fair
> market value, The market value was determined by looking at the selling
> prices on eBay. A record was kept of some eBay auctions, so if it was ever
> queried, I have proof the amount it was sold to the company for was fair.
> An *invoice *was provided by me personally to the company.
> 
> I personally paid $16,000 for one of the items a year or more before
> setting  up the company, but it was sold to the company for less, as it
> would have depreciated in that time. So from when the company started
> trading, it had everything it needed. No cash was actually needed.
> 
> That being the case, I think it's probably right to consider this an *expense
> *- it is not much different from if the equipment was purchased from a test
> equipment dealer, although they would typically want repaying within 30
> days, whereas my invoice did not state when it had to be repaid by. Since
> setting up the company, I've sold some other items to the company at a fair
> market value.
> 
> When I look on the company's balance sheet, there is section
> 
> * Creditors: Amount falling due wit

Re: [GNC] Directors loan - do I need an expense account?

[Michael or Penny Novack]

On 12/10/2021 10:18 AM, Gyle McCollam wrote:

This is a lot different than your first explanation.  Under these circumstances where you 
sold the company electronic equipment, it is indeed just an expense.  On the company's 
books, it is the same as if the company had bought the equipment from any other vendor 
and would in no way be a "director's loan".  Treat it like any other expense on 
the company's books.


Accounting, not gnucash, but ...

a) This equipment, is it short lived? (expected to wear out in a year or 
so). Is it "consumables" used up in processing?


b) If not, do the rules of your jurisdiction allow you to immediately 
expense it? Or do they require you to treat this equipment as a fixed 
asset depreciating over X years (in other words, becomes an expense as 
it depreciates)


c) Note that usually a business will depreciate fixed assets as rapidly 
as allowed. But it also might manipulate this to control in which year 
has losses and in which profits. For example, might have to show a 
profit in X of the last Y years to be considered a "business" as opposed 
to a "hobby".


Michael D Novack

PS -- Again pointing out that I lack ":qualifications" to give 
accounting advice or tax advice. PLEASE CONSULT A PROFESSIONAL.



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Re: [GNC] Directors loan - do I need an expense account?

[Stephen M. Butler]

On 12/9/21 19:38, Stan Brown wrote:

On 2021-12-09 11:04, Gyle McCollam wrote:

If the loan is to the company, as stated in your original email, it is a 
liability of the company.  Stan is incorrect, but if the company makes a loan 
TO the director, then it would be an asset of the company and he would be 
correct.


But the OP said:


... as I thought that was the closest thing to allowing money to be
moved out of the company, into my personal bank account.
When I tried to pay myself using GnuCash, I was expecting money to go
out of the company bank account,into my personal account, and reduce
the company's liability. However when I set up a bill, I could see it
was only possible to bill this as assets or expenses - *not as a
liabilitiy*. Does this mean I need to set up another account for
expenses?


"money out of the company into my personal bank account" -- that seems
pretty clear to me that the company is lending the director money, not
the other way round.


1.  Lending money.
2.  Paying a Dividend.
3.  Reimbursement for expense paid by individual.
4.  Reduction of equity share (stock buy-back).

All of those could be "money out of the company into my personal bank 
account".


--
Stephen M Butler, PMP, PSM
stephen.m.butle...@gmail.com
kg...@arrl.net
253-350-0166
---
GnuPG Fingerprint:  8A25 9726 D439 758D D846 E5D4 282A 5477 0385 81D8

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Re: [GNC] Directors loan - do I need an expense account?

[Adrien Monteleone]

Yes "money out of the company into my personal bank account" can be at 
least four things I can think of right off:


1. Expense (spread out payments or not)
2. Repayment of Liability
3. Dividend
4. Draw

But I think the further details about the selling of equipment at least 
shows that this isn't (likely) anything but a simple expense for the 
company.


Regards,
Adrien

On 12/10/21 1:39 AM, Liz Dodd wrote:

On Thu, 9 Dec 2021 19:38:16 -0800
Stan Brown  wrote:


"money out of the company into my personal bank account" -- that seems
pretty clear to me that the company is lending the director money, not
the other way round.


not if it is a repayment

So we are not completely clear about the circumstances.

LIz


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Re: [GNC] Directors loan - do I need an expense account?

[Dr. David Kirkby]

On Fri, 10 Dec 2021 at 15:18, Gyle McCollam  wrote:

> This is a lot different than your first explanation.  Under these
> circumstances where you sold the company electronic equipment, it is indeed
> just an expense.  On the company's books, it is the same as if the company
> had bought the equipment from any other vendor and would in no way be a
> "director's loan".  Treat it like any other expense on the company's books.
>

Yes, I agree, it's different from my first explanation. My accountant has
confused me, by saying it's a directors loan. After setting the company up,
and getting him as an accountant, he sent me a blank Excel spreadsheet with
"directors loan" as one of the tabs. Last year he said I had mis-calculated
the directors loan as it did not agree with the bank statements. So I asked
him in a recent email to clarify the exact outstanding amount, which he
did.

*"3) Directors loan at the end of the financial year - £1,995.31 (see
attached movement schedule)"*

(I've not attached anything, but that is a simple copy/paste from his email)

Sorry for the confusion, but it was my accountant that confused me.

I believe the main thing is that the date submitted to HMRC is correct,
which it is. The outstanding amount is being sent to HMRC as an expense. I
think he just confused me by using this term "directors loan" when
technically it's not the right term.

Dave
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Re: [GNC] Directors loan - do I need an expense account?

[Gyle McCollam]

This is a lot different than your first explanation.  Under these circumstances 
where you sold the company electronic equipment, it is indeed just an expense.  
On the company's books, it is the same as if the company had bought the 
equipment from any other vendor and would in no way be a "director's loan".  
Treat it like any other expense on the company's books.


Thank You,
Gyle McCollam

Gyle McCollam

609.680.2326 Mobile

gmccol...@live.com<mailto:gmccol...@gyleshomes.com>   email


From: gnucash-user  on 
behalf of Dr. David Kirkby 
Sent: Friday, December 10, 2021 8:13 AM
Cc: gnucash-u...@lists.gnucash.org 
Subject: Re: [GNC] Directors loan - do I need an expense account?

On Fri, 10 Dec 2021 at 05:14, Adrien Monteleone <
adrien.montele...@lusfiber.net> wrote:

> With the usual caveat that this is not formal advice, I agree with
> Michael. This looks like what we call "Owner's Equity" in my parts.
>
> If this is just for you, then my personal advice is keep it simple.
>
> Keep it in Equity.
>
> You can put the original 'loan' into "Owner's Equity", and any money
> taken out (or paid back) *from/by* the company can be in "Owner's Draw".
> (which should be a child of Owner's Equity so the parent results in a
> net amount at a glance.)
>
> If the Owner returns some of the Draw, that would simply be a reversing
> type transaction in the Draw account, or an increase in their main
> Equity account. (though I suppose you could track it in a separate child
> account still if you wanted, but unnecessary as a report can handle that
> detail.)
>
> An Accounting textbook would most probably advise that none of this
> involves expenses or revenue. (unless you start introducing 'interest
> paid' in either direction.)
>
> Equity is already understood to be a 'liability' of a special type — to
> the owner(s). It usually is *not* recorded as normal liabilities,
> because those are usually short term (less than one year) or long term,
> but Equity is essentially on indefinite terms.
>
> Regards,
> Adrien
>

The more I think about this, and look at our government's website about
director loans

https://www.gov.uk/directors-loans

I believe I *might *be right in saying the following.

1) My accountant is using the term* "directors loan"* rather loosely to me,
but the way he is recording the transactions to HMRC is accurate.
2) Me confusing you guys, but saying it's a* directors loan*, whereas in
fact, it does *not *meet the definition of a director loan from
https://www.gov.uk/directors-loans

The original source of this "debt/liability/expense" or whatever you want
to call it, was *not *me paying money into the company. Instead I sold the
company some expensive electronic test equipment, and other items at a fair
market value, The market value was determined by looking at the selling
prices on eBay. A record was kept of some eBay auctions, so if it was ever
queried, I have proof the amount it was sold to the company for was fair.
An *invoice *was provided by me personally to the company.

I personally paid $16,000 for one of the items a year or more before
setting  up the company, but it was sold to the company for less, as it
would have depreciated in that time. So from when the company started
trading, it had everything it needed. No cash was actually needed.

That being the case, I think it's probably right to consider this an *expense
*- it is not much different from if the equipment was purchased from a test
equipment dealer, although they would typically want repaying within 30
days, whereas my invoice did not state when it had to be repaid by. Since
setting up the company, I've sold some other items to the company at a fair
market value.

When I look on the company's balance sheet, there is section

* Creditors: Amount falling due within one year

My accountant is computing the "Creditors: Amount falling due within one
year" by including the money the company owes to me personally. It's not
recorded in another section of the balance sheet, which is "Shareholders
funds".

So if I'm not mistaken, I'm simply a creditor. The company just owes me
money for goods I have supplied, but not been paid for. Therefore this
should be recorded as an expense. Does the above seem logical?

If so, in GnuCash, I should probably have an account

Expenses -> Test Equipment.

and record the transactions under that. But given historically I've had a
"directors loan" tab in Excel, I might as well just continue with that.

I realise many on here are not accountants, and those that are accountants
are not going to want to be held responsible for their comments, but does
the above seem reasonably logical?

Dave
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Re: [GNC] Directors loan - do I need an expense account?

[Dr. David Kirkby]

On Fri, 10 Dec 2021 at 05:14, Adrien Monteleone <
adrien.montele...@lusfiber.net> wrote:

> With the usual caveat that this is not formal advice, I agree with
> Michael. This looks like what we call "Owner's Equity" in my parts.
>
> If this is just for you, then my personal advice is keep it simple.
>
> Keep it in Equity.
>
> You can put the original 'loan' into "Owner's Equity", and any money
> taken out (or paid back) *from/by* the company can be in "Owner's Draw".
> (which should be a child of Owner's Equity so the parent results in a
> net amount at a glance.)
>
> If the Owner returns some of the Draw, that would simply be a reversing
> type transaction in the Draw account, or an increase in their main
> Equity account. (though I suppose you could track it in a separate child
> account still if you wanted, but unnecessary as a report can handle that
> detail.)
>
> An Accounting textbook would most probably advise that none of this
> involves expenses or revenue. (unless you start introducing 'interest
> paid' in either direction.)
>
> Equity is already understood to be a 'liability' of a special type — to
> the owner(s). It usually is *not* recorded as normal liabilities,
> because those are usually short term (less than one year) or long term,
> but Equity is essentially on indefinite terms.
>
> Regards,
> Adrien
>

The more I think about this, and look at our government's website about
director loans

https://www.gov.uk/directors-loans

I believe I *might *be right in saying the following.

1) My accountant is using the term* "directors loan"* rather loosely to me,
but the way he is recording the transactions to HMRC is accurate.
2) Me confusing you guys, but saying it's a* directors loan*, whereas in
fact, it does *not *meet the definition of a director loan from
https://www.gov.uk/directors-loans

The original source of this "debt/liability/expense" or whatever you want
to call it, was *not *me paying money into the company. Instead I sold the
company some expensive electronic test equipment, and other items at a fair
market value, The market value was determined by looking at the selling
prices on eBay. A record was kept of some eBay auctions, so if it was ever
queried, I have proof the amount it was sold to the company for was fair.
An *invoice *was provided by me personally to the company.

I personally paid $16,000 for one of the items a year or more before
setting  up the company, but it was sold to the company for less, as it
would have depreciated in that time. So from when the company started
trading, it had everything it needed. No cash was actually needed.

That being the case, I think it's probably right to consider this an *expense
*- it is not much different from if the equipment was purchased from a test
equipment dealer, although they would typically want repaying within 30
days, whereas my invoice did not state when it had to be repaid by. Since
setting up the company, I've sold some other items to the company at a fair
market value.

When I look on the company's balance sheet, there is section

* Creditors: Amount falling due within one year

My accountant is computing the "Creditors: Amount falling due within one
year" by including the money the company owes to me personally. It's not
recorded in another section of the balance sheet, which is "Shareholders
funds".

So if I'm not mistaken, I'm simply a creditor. The company just owes me
money for goods I have supplied, but not been paid for. Therefore this
should be recorded as an expense. Does the above seem logical?

If so, in GnuCash, I should probably have an account

Expenses -> Test Equipment.

and record the transactions under that. But given historically I've had a
"directors loan" tab in Excel, I might as well just continue with that.

I realise many on here are not accountants, and those that are accountants
are not going to want to be held responsible for their comments, but does
the above seem reasonably logical?

Dave
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Re: [GNC] Directors loan - do I need an expense account?

[Liz Dodd]

On Thu, 9 Dec 2021 19:38:16 -0800
Stan Brown  wrote:

> "money out of the company into my personal bank account" -- that seems
> pretty clear to me that the company is lending the director money, not
> the other way round.

not if it is a repayment

So we are not completely clear about the circumstances.

LIz
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Re: [GNC] Directors loan - do I need an expense account?

[Adrien Monteleone]

With the usual caveat that this is not formal advice, I agree with 
Michael. This looks like what we call "Owner's Equity" in my parts.


If this is just for you, then my personal advice is keep it simple.

Keep it in Equity.

You can put the original 'loan' into "Owner's Equity", and any money 
taken out (or paid back) *from/by* the company can be in "Owner's Draw". 
(which should be a child of Owner's Equity so the parent results in a 
net amount at a glance.)


If the Owner returns some of the Draw, that would simply be a reversing 
type transaction in the Draw account, or an increase in their main 
Equity account. (though I suppose you could track it in a separate child 
account still if you wanted, but unnecessary as a report can handle that 
detail.)


An Accounting textbook would most probably advise that none of this 
involves expenses or revenue. (unless you start introducing 'interest 
paid' in either direction.)


Equity is already understood to be a 'liability' of a special type — to 
the owner(s). It usually is *not* recorded as normal liabilities, 
because those are usually short term (less than one year) or long term, 
but Equity is essentially on indefinite terms.


Regards,
Adrien

On 12/9/21 7:29 PM, Dr. David Kirkby wrote:

On Thu, 9 Dec 2021 at 22:48, Michael or Penny Novack <
stepbystepf...@comcast.net> wrote:


On 12/9/2021 2:04 PM, Gyle McCollam wrote:

Repeat, get professional advice or at least learn the accounting
yourself. This is an accounting question, not a gnucash question.

Michael D Novack



I believe I was overthinking this - making it more complex than it needs to
be. To  be honest, I'm using GnuCash as a bookkeeping tool, not accountancy.*
Exactly how I record the information is not important, as long as my
accountant can understand what I've done. *

Maybe it's best if I just set up an expense account of  "director loan"
with the appropriate opening balance. Then at the end of the accounting
period, he will look at the balance, and add it to the other liabilities he
calculates. As long as my accountant can see what I've done, that's good
enough.

I have in the past used a spreadsheet where I record
* Expenses
* Income
* Bank account.
amongst other things.

The problem I've found is that when the expenses is subtracted from the
income, it does not agree with the change in the bank account due to
errors. A double-entry bookkeeping system should reduce the chance of
errors.

Dave



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Re: [GNC] Directors loan - do I need an expense account?

[Stan Brown]

On 2021-12-09 07:23, Dr. David Kirkby wrote:

> I can't understand why you say it's not a liability, when the company owes
> money to someone else? How is it any different to owing money on a credit
> card for example?


The company does not owe you any money. You said money would flow from
the company to you, as a loan. When you get a loan from the bank, do you
say that the bank owes you money? Of course not. The loan is an asset on
their books and a liability on yours.

It is the same when the company lends you money as when the bank lends
you money: an asset to the bank and a liability to you.



-- 

Stan Brown

Tehachapi, CA, USA

https://BrownMath.com
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Re: [GNC] Directors loan - do I need an expense account?

[Stan Brown]

On 2021-12-09 11:04, Gyle McCollam wrote:
> If the loan is to the company, as stated in your original email, it is a 
> liability of the company.  Stan is incorrect, but if the company makes a loan 
> TO the director, then it would be an asset of the company and he would be 
> correct.


But the OP said:

>... as I thought that was the closest thing to allowing money to be
>moved out of the company, into my personal bank account.

>When I tried to pay myself using GnuCash, I was expecting money to go
>out of the company bank account,into my personal account, and reduce
>the company's liability. However when I set up a bill, I could see it
>was only possible to bill this as assets or expenses - *not as a
>liabilitiy*. Does this mean I need to set up another account for
>expenses?


"money out of the company into my personal bank account" -- that seems
pretty clear to me that the company is lending the director money, not
the other way round.

-- 

Stan Brown

Tehachapi, CA, USA

https://BrownMath.com
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Re: [GNC] Directors loan - do I need an expense account?

[Dr. David Kirkby]

On Thu, 9 Dec 2021 at 22:48, Michael or Penny Novack <
stepbystepf...@comcast.net> wrote:

> On 12/9/2021 2:04 PM, Gyle McCollam wrote:
>
> Repeat, get professional advice or at least learn the accounting
> yourself. This is an accounting question, not a gnucash question.
>
> Michael D Novack
>

I believe I was overthinking this - making it more complex than it needs to
be. To  be honest, I'm using GnuCash as a bookkeeping tool, not accountancy.*
Exactly how I record the information is not important, as long as my
accountant can understand what I've done. *

Maybe it's best if I just set up an expense account of  "director loan"
with the appropriate opening balance. Then at the end of the accounting
period, he will look at the balance, and add it to the other liabilities he
calculates. As long as my accountant can see what I've done, that's good
enough.

I have in the past used a spreadsheet where I record
* Expenses
* Income
* Bank account.
amongst other things.

The problem I've found is that when the expenses is subtracted from the
income, it does not agree with the change in the bank account due to
errors. A double-entry bookkeeping system should reduce the chance of
errors.

Dave
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Re: [GNC] Directors loan - do I need an expense account?

[Michael or Penny Novack]

On 12/9/2021 2:04 PM, Gyle McCollam wrote:

If the loan is to the company, as stated in your original email, it is a 
liability of the company.  Stan is incorrect, but if the company makes a loan 
TO the director, then it would be an asset of the company and he would be 
correct.

I will repeat that I lack "qualifications" to give accounting advice and 
in any case the question is not about my jurisdiction. But I vaguely 
recall that such "insider" transactions are handled under "equity". 
That's where the accounts would be representing the shares of the 
owners. The point is that when an director/part owner borrows from the 
company, it is more like withdrawing part of his or her investment. Yes, 
hopefully temporarily, which is why being considered a "loan" .


Seriously, if not going to get professional advice at least look the 
matter up in an accounting text to see what the proper treatment of this 
situation is and for your jurisdiction.


And it might make a (big) difference if this were a "secured loan" 
backed up by something other than the borrowers share of the business. 
But then I think it would be called something different than a "director 
loan".


Repeat, get professional advice or at least learn the accounting 
yourself. This is an accounting question, not a gnucash question.


Michael D Novack


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Re: [GNC] Directors loan - do I need an expense account?

[Gyle McCollam]

If the loan is to the company, as stated in your original email, it is a 
liability of the company.  Stan is incorrect, but if the company makes a loan 
TO the director, then it would be an asset of the company and he would be 
correct.


Thank You,
Gyle McCollam

Gyle McCollam

609.680.2326 Mobile

gmccol...@live.com<mailto:gmccol...@gyleshomes.com>   email


From: gnucash-user  on 
behalf of Dr. David Kirkby 
Sent: Thursday, December 9, 2021 10:23 AM
Cc: GNU Cash User 
Subject: Re: [GNC] Directors loan - do I need an expense account?

On Thu, 9 Dec 2021 at 13:57, Stan Brown  wrote:

> Reminder: The normal thing is to reply to the GnuCash list, not to
> individual people who post.
>
> On 2021-12-08 15:49, Dr. David Kirkby wrote:
> > Liabilities -> Accounts Payable -> Director Loan.
>
> It's not a liability to the company. It will become an asset (to the
> company) when it is paid out, and the asset will be extinguished when
> the loan is repaid.
>

I can't understand why you say it's not a liability, when the company owes
money to someone else? How is it any different to owing money on a credit
card for example?

Stan Brown
>

Dave
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Re: [GNC] Directors loan - do I need an expense account?

[Dr. David Kirkby]

On Thu, 9 Dec 2021 at 13:57, Stan Brown  wrote:

> Reminder: The normal thing is to reply to the GnuCash list, not to
> individual people who post.
>
> On 2021-12-08 15:49, Dr. David Kirkby wrote:
> > Liabilities -> Accounts Payable -> Director Loan.
>
> It's not a liability to the company. It will become an asset (to the
> company) when it is paid out, and the asset will be extinguished when
> the loan is repaid.
>

I can't understand why you say it's not a liability, when the company owes
money to someone else? How is it any different to owing money on a credit
card for example?

Stan Brown
>

Dave
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Re: [GNC] Directors loan - do I need an expense account?

[Stan Brown]

Reminder: The normal thing is to reply to the GnuCash list, not to
individual people who post.

On 2021-12-08 15:49, Dr. David Kirkby wrote:
> Liabilities -> Accounts Payable -> Director Loan.

It's not a liability to the company. It will become an asset (to the
company) when it is paid out, and the asset will be extinguished when
the loan is repaid.

> as I thought that was the closest thing to allowing money to be moved out
> of the company, into my personal bank account.
> 
> When I tried to pay myself using GnuCash, I was expecting money to go out
> of the company bank account,into my personal account, and reduce the
> company's liability. However when I set up a bill, I could see it was only
> possible to bill this as assets or expenses - *not as a liabilitiy*.
> Does this mean I need to set up another account for expenses?

It means you shouldn't set it up as a bill, because it isn't one.

-- 
Stan Brown
Tehachapi, CA, USA
https://BrownMath.com
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Re: [GNC] Directors loan - do I need an expense account?

[Gyle McCollam]

I would set the loan up in a loan account (liability), not under accounts 
payable.  When you want to make a payment, you would debit the loan account and 
credit accounts payable director.  When you actually pay the "invoice" you 
would debit accounts payable and credit the checking account.


Thank You,
Gyle McCollam

Gyle McCollam

609.680.2326 Mobile

gmccol...@live.com   email


From: gnucash-user  on 
behalf of Dr. David Kirkby 
Sent: Wednesday, December 8, 2021 6:49 PM
To: GNU Cash User 
Subject: [GNC] Directors loan - do I need an expense account?

A "directors loan" is quite a common thing in the UK for companies. The
concept is fairly simple, so anyone in the world should be able to
understand my description.

Generally the director loans the company money to get it up and running, so
the company has a liability to the director.

https://www.gov.uk/directors-loans/you-lend-your-company-money

The director can charge the company interest, but I don't do this, as it
makes one's personal taxation more complicated.

It's also possible for the director, or close family member to borrow money
from the company with no interest, subject to certain restrictions - it has
to be paid by a certain time.

https://www.gov.uk/directors-loans

I don't think my accountant will particularly care how I do this, but I
thought I would do it this way. If anyone can suggest a better way, please
do.

1) Add myself as a vendor
2) Since the company owes me money, I set the account

Liabilities -> Accounts Payable -> Director Loan.

as I thought that was the closest thing to allowing money to be moved out
of the company, into my personal bank account.

When I tried to pay myself using GnuCash, I was expecting money to go out
of the company bank account,into my personal account, and reduce the
company's liability. However when I set up a bill, I could see it was only
possible to bill this as assets or expenses - *not as a liabilitiy*.

Does this mean I need to set up another account for expenses?

Expenses  -> Director loan ?

If I do that, I could pay from the  company bank account into the Expenses
-> Director loan account, *but it would not reduce the liabilities account*.
I know "split transactions" exist, but I have not studied them. Is that
what I need here?

Can someone please point me in the right direction, so I can move money out
of the company, into my personal account and reduce the company's
liability?

In the event the company paid me the complete directors loan, and I decided
to borrow money from the company, would that expense account just go
negative?

Dave
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